Sunday, December 30, 2012

December 17, 12012 -United States District Judge Robert G. Doumar sentenced Lynette Smith of Suffolk, VA to 10 months in prison for altering records to conceal Medicaid fraud The fraud was committed by A Caring Hand Home Health Care Services, Inc. between January 2008 through October 2011. A Caring Hand is owned and operated by Janice W. Holland.

“Holland submitted to the program approximately 900 fraudulent claims for payment representing that respite care services had been provided to thirty (30) Medicaid recipients, when in fact no such services had actually been provided. As a result, Holland obtained health care benefit payments totaling approximately $630,000 to which she was not entitled.

During the period from in or about September 2010 through October 6, 2011, Holland and Smith, and members of the staff of A Caring Hand at their direction, altered, falsified and made false entries in the office records of A Caring Hand to conceal and cover up the fact that Holland had submitted false and fraudulent claims for payment to the Virginia Medicaid program. On multiple occasions, Holland and Smith met with staff members and directed them to alter, falsify and make false entries into office records, including the creation of false and fraudulent time sheets, in order to make it appear that the respite care services for which Holland had billed the program had actually occurred, when in fact they knew that no such services had been provided. Approximately twelve staff members knowingly committed the alteration and falsification of office records at the direction of Holland and Smith, who were aware of an upcoming scheduled audit of the office records. Holland and Smith committed these acts with the intent to impede, obstruct and influence the proper administration of the Virginia Medicaid program, which is a matter within the jurisdiction of the Department of Health and Human Services.

Holland has pled guilty to health care fraud, alteration of records and aggravated identity theft, and will be sentenced on January 22, 2013.”

Saturday, December 29, 2012

December 28, 2012 -- Dental service organizations (DSOs) in Texas would be subject to greater oversight under a bill being introduced by a Texas legislator who accused the groups of "outrageous actions" involving unnecessary pediatric procedures.

SB 151 is designed to "strengthen the Texas State Board of Dental Examiners' ability to ensure that dental treatment is directed solely by licensed dentists, not by corporate entities." The measure would also require DSOs to register with the board and prohibits them from "interfering with dentists' treatment decisions."

“These types of entities have been involved in some of the illegal and, quite candidly, outrageous actions.”

— Sen. Jane Nelson

The bill was prefiled on December 21 by Sen. Jane Nelson (R-Flower Mound) in advance of the 83rd Regular Session of the Texas Legislature, which reconvenes on January 8. It would require DSOs to register with the state dental board, and it also would allow the dental board to impose administrative penalties and disciplinary actions against DSOs that violate the Texas Dental Practice Act. Similar to in many states, the law states that only licensed dentists can own and operate dental clinics.

Currently, DSOs in Texas are not subject to any state regulation, Nelson noted.

"We need to ensure that these organizations are accountable to the board and, more importantly, that they are not substituting their judgment for that of our trained, licensed dentists," Nelson said in a statement.

Dental Patient Protection: SB 151 strengthens the Texas State Board of Dental Examiners' ability to ensure that dental treatment is directed solely by licensed dentists, not by corporate entities. It requires dental service organizations (DSOs) to register with the Board and prohibits them from interfering with dentists' treatment decisions. It also allows the Board to impose administrative penalties and take disciplinary action against a DSO found in violation of the Texas Dental Practice Act. Before performing dental treatment on a child, SB 151 requires that a dentist inform the child's parent or guardian that they have the option to be present in the treatment room, and it prohibits a dentist from performing the dental treatment or procedure without the parent or guardian present if they desire to be in the treatment room. Currently, DSOs are not subject to any state regulation. "We need to ensure that these organizations are accountable to the Board and, more importantly, that they are not substituting their judgment for that of our trained, licensed dentists. No child should undergo complicated, painful procedures without a parent being involved at every point in the process. These types of entities have been involved in some of the illegal and, quite candidly, outrageous actions involving the enticement of children to undergo costly and oftentimes unnecessary procedures at the taxpayer's expense."

1. Suddenly some state is concerned with sanitation?? OMG!2. Is in home dental offices in our near future to escape the corporate dental care? Hey, as long as they are licensed, have the equipment and supplies they prefer instead of the cheap shit dentists are forced to use by corporate idiots, I’d be a patient.

Man accused of performing dentistry without license

Staff Reports

Friday, December 21, 2012

An East Naples man who has been practicing dentistry out of his apartment is not actually a dentist, according to Collier County sheriff's deputies.

Detectives got wind that Luis Fernando Suarez-Paz, 51, was taking patients at his apartment at 108 Santa Clara Drive, reports said. Last week, an undercover deputy set up an appointment with Suarez-Paz to be examined because of a toothache. The undercover deputy was taken into a small room in the apartment with a reclining chair, dental instruments and a dental exam light, according to an arrest report.

Suarez-Paz examined the deputy, told her to get x-rays taken "at a real dentist office" and then bring them back to have a root canal performed. Suarez-Paz said the exam was free but the root canal would cost $350 over four visits, reports said.

Detectives found no record for Suarez-Paz with the state's department of health and could not find a medical or dental license issued for him in Florida.

On Thursday, deputies executed a search warrant and found "a very dirty and unhygienic environment that had outward appearances of a dental office," reports said.

Suarez-Paz faces charges of practicing dental hygiene without an active license and operation of a dental office by a non-licensed person.

Fake dentist arrested, says Montgomery County DA

Cheryl Laing and Jessica Gullickson, both of Broomall, Pa., were arrested after an investigation into the unauthorized practice of dentistry at the “Smilz 4 Life” dental office located on Old Lancaster Avenue in the Bryn Mawr section of Lower Merion Township, Montgomery County District Attorney Risa Vetri Ferman and Lower Merion Police Superintendent Michael J. McGrath announced on Monday.

Laing and Gullickson are charged with Corrupt Organizations, Criminal Conspiracy, multiple counts of Theft by Deception, Unauthorized Practice of Dentistry and Recklessly Endangering Another Person.

The investigation, which was assisted by the Montgomery County Investigative Grand Jury, revealed that during regular office hours, Laing was employed as a dental assistant at Smilz 4 Life. The practice was operated by a licensed dentist. After business hours, Laing set up her own dental practice at Smilz 4 Life while holding herself out to patients as a licensed dentist.

Saturday, December 22, 2012

For the past several years, hundreds of Texas Orthodontic clinics have put braces on children who didn't need them, all to bilk the Medicaid system - stealing your tax dollars. Now that the Feds and State of Texas are hunting down the dirty dogs. What did the owners do? Well they locked their doors and ran; being the cowards they are. Now, ten’s of thousands of children have been abandoned, braces still on and treatment unfinished. Now, volunteers are stepping in.

Roderick Williams, 11, got his braces more than two years ago. When we met him, all that remained were brackets. His wires were broken. His orthodontist was out of business.

His mom, Denecia Williams, was at a loss.

"Now what do I do?" she said. "And it's been a hassle ever since."

Like hundreds of other Texas kids, Roderick was stuck without anyone else to remove what was still left in his mouth. Now there is.

I suppose some could read this as message that they are very serious in NC when it comes to Medicaid fraud. HOWEVER, since one set of clinics in particular defrauds Medicaid more than this in an hour, it’s laughable.

Thinking what dentists could come in at 5th place, I started a list. Not revealing what actually made my list — as not to anger some of my friend dentists —I’ll just say that “ethics” was not in the top 50!

December 11, 2012, the same day, NBC aired their explosive investigation about the horrors still happening to children at Small Smiles Dental Centers, the Richmond Institute for Continuing Dental Education followed up on the ADA article — their headline read — “Dentists Rank #5 as Most Ethical Profession”

It’s said the Gallup survey asked 1,015 adults from 50 states to rate — on a five point scale ranging from “very high” to “very low” — how they perceived honesty and ethics of 21 professions. The survey concluded the American public believes dentists are 62% honest. The survey also concluded Congress and cars salespeople are perceived as the least ethical.

If Gallup Poll is correct, then maybe the statements each year by the '”Pew Institute” is more spot on that thought; at least their mantra — “There is a Dental Crisis in America”. There is now little doubt public health is in danger. Either abandoning educational programs in classrooms on dental hygiene — brushing and flossing — completely or at least enhancing the programs with additional instruction more like:

“Recognize a Dentists Who Wants in Your Pants, Not in Your Mouth” —101

“You Were Safer at the Barber Shop" — 101–103

Playground in the Waiting Room = Playground in Your Mouth — K – 12

I can only conclude the 1,015 people who were asked must have been:

A. grandparents of freshman dental students; who also happen to be picking up the tab for their grandchild’s education.

B. the surveyed all have a family member named in a current lawsuit for dental malpractice

C. none have seen a dentist since at least 2006, and don’t have a clue.

DALLAS -- In the eighteen months since News 8 began reporting on the Medicaid dental program, we’ve discovered hundreds of millions of dollars paid out by Texas that other states don’t pay for at all. We’ve discovered children being lured from their neighborhoods into dental chairs, just for the Medicaid dental fees they’d bring. And we’ve outlined how gift cards have been used to entice parents to bring their kids to certain dentists.

The State of Texas is now cracking down on those practices through enforcement and new systems for reimbursing dentists. But that’s only increased the competition for new, young Medicaid patients and the income they can bring to a dental office. In their worst forms, might be described as tempt and torture.

The Switch BonusIn the parking lots of Dallas DART stations, crude flyers are being tucked under commuters’ windshield wipers.

“Get paid to take ur [sic] kids to the dentist. The dentist is giving $20.00-$35.00 per kid,” the flyer reads.

December 11, 2012On Tuesday, December 11, 2012, The Today Show aired an investigative report about the on going troubles at the Small Smiles Dental Centers. Interviews included one with Health and Human Services (HHS) officials in charge of overseeing the compliance of the notoriously troubled clinics.

1. “Dentists have been fired” – Well, dentists are fired there every day!! They are fired every day because they don’t meet the production numbers set by the corporate office. Their turn over had been setting at 48% since the beginning!

What about the Chief Dental Officer – Steven Adair, DDS? He actually got a promotion. Dr. Adair is the author of the news letter for CSHM in which he suggests instead of the papoose board, try the “superman cape” method.

Compliance officers? – Yes, a few. They have burned through 3 in 2.5 years. CSHM will not hesitate to been throw one under the bus, blaming them for falsified reports to the OIG.

2. “Clinics have been closed” – Yes, they have filed bankruptcy! The started closing clinics in early 2011! HHS only forced 1 clinic in actually close – Manassas Virginia.

3. “This is not the same company” – True, it simply filed for bankruptcy, reorganized with some of the same investors in the background, and changed it’s name, replaced the CEO and President. But that was in 2011!

3. “The Independent Monitor is telling us that Quality of Care is consistently improving” – The same independent monitor in place for 3 years! The one CSHM pays. The one whose head dental investigator is buddies with the company’s Chief Dental Officer. So exactly when did that “improvement” begin? June of 2012? Certainly not in April 2012? The new people in charge actually stepped in October 2011. It just wasn’t on paper with the bankruptcy court until June 2012.

The company has been in the news, how many times since 2007? Countless!!!

Wednesday, December 12, 2012

Inc. has listed it’s top job creators for 2012, giving the top 100 their “High Power Award”.

They called them “The Real Heroes of the American Economy”. I almost choked when I checked the list, there were 4 DSO’s in the top 40.

Rank

DSO

JobsCreated in 2012

Total Employees

Revenue

Location

4th

Pacific Dental

1451

3422

$250-$500 million

Irvine, CA

6th

Heartland Dental Care

1150

3201

$250-$500 million

Effingham, IL

25th

Great Expressions

660

1770

$100-$250 million

Bloomfield Hills, MI

31st.

Smiles Brands

551

4483

$250-$500 million

Irvine, CA

Each of the above company claim they are Dental Service Organization or Dental Management Companies and are merely hired by dentists who hate mundane office work. Each claim they simply provide much needed day to day operational support, such as bookkeeping, payroll, human resources, software, records keeping, etc. Ya know, the office crap everyone hates. The duties normally an office manager and one assistant could probably handle.

Let’s see how that adds up.

Pacific Dental – Ranked at #4 in new jobs in 2012. It’s hard to nail down a number but it’s around 300 offices, they claim to simply support/manage. Let’s just say it’s 275. That means for each and every office they provide support takes 12.44 “support” employees. WOW!

Heartland Dental – Heartland Dental, ranked # 6, claims they do not own any dental clinics, but simply manager 370 across the US. According to “Inc.” they employ 3201 people. That means they have 8.6 employees to do the bookkeeping, filing, banking, and scheduling, for each and every clinic, that is supposedly owned and operated by self employed dentist who hates office work. Does this sound logical?

Great Expressions – Great Expressions says it “manages” 170 dental centers and it takes 1770 people to manage them. That is 10.4 employees per clinic to “manage” the day to day office duties.

Smiles Brands – Smiles Brands includes, Monarch, BrightNow!, Castle Dental and Newport Dental. Like the others, Smile Brand’s say they simply “support” about 400 clinics that has 1300 dentists and hygienists, in 18 states. Does this mean it takes 11 Smile Brands employees to manage each clinic, already staffed with dentists and hygienist? If this is the case, then their employees really suck at “supporting”.

Does it add up? Make any sense whatsoever?

No! Not unless these companies in truth illegally own and operate the clinics and all these employees include licensed dental professionals who are actually employees of each of these companies.

December 12, 2012 - The national children’s dental clinic Small Smiles is under fire after an investigative report revealed allegations that the chain’s clinics have been performing substandard work and unnecessary dental procedures – responsible for increasing taxpayer cost. The accusations come from numerous parents, former employees of the company and government investigators, who are concerned about the exploitation of children’s health.

According to an NBC News investigation of 63 Small Smiles clinics over the past three years, the alleged practices are in direct violation of a settlement the chain made with the Department of Justice in early 2010. The settlement was in response to previous allegations accusing the company of performing unnecessary and substandard dental procedures on low-income children.

Here is the letter the company’s new CEO sent in response to inquiry by NBC during their investigation. Note, David Wilson, the new CEO’s name is blurred out. Mr. Wilson also declined interview. Makes me wonder if Mr. Wilson has gone into hiding or something.

After the story aired December 11, 2012, the company put out a response statement; again, names of any person associated with the company omitted. However, they sure want the public to believe they have the ‘stamp of approval’ from HHS-OIG. Read statement..

BTW, the 50 new dentists HHS-OIG spokesperson Lisa Re and CSHM bragged about hiring – they employ between 200-250, (maybe more) dentists in the 66 clinics. Their turnover rate is approximately 48% for dentists. They hire 50 news dentists every month dang near it! The last week of every month is “new hire training week” in Nashville and you will find between 15-20 or more at any of those training sessions.

Tuesday, December 11, 2012

By Talesha Reynolds and Lisa Myers
It’s just over 5 years since HHS-OIG and DOJ began an investigation of Small Smiles Dental Centers.
It’s 3 years after the company was put under a Corporate Integrity Agreement.
Small Smiles abuse continues. In the new investigation - HHS-OIG sound more like the company's PR firm than protectors of public health; Senator Grassley calls for the company to be closed down and says it’s all about the dollars.

Visits to the dentist can be upsetting for little children, but when
Autum Archuleta took her son Nathan to a Small Smiles dental clinic in
February 2010, it was beyond anything she could have imagined. The
dentist gave Nathan, then almost 3, three crowns, two baby root canals
and six silver fillings in 25 minutes.
While in the waiting room,
Archuleta says she heard her son screaming and burst into the treatment
room. She says Nathan was crying and struggling to move while being held
down by three clinic employees and wrapped from his head to his feet in a stabilization device called a papoose board. She thinks he wasn't properly numbed.
"He
wasn't the same for a long time after we brought him home," Archuleta
said. "He cried a lot...He wasn't my little boy. He didn't smile...The
night terrors were the worst. I mean it was a lot of sleepless nights."
A
dentist who later reviewed Nathan's records said the work was shoddy
and many procedures unnecessary. A dentist who saw Nathan the following
year wrote that he had "severe situational trauma."
"To me I think
they did it for the money," Archuleta said of Small Smiles. "Flat-out
did it for the money. Because it was Medicaid and Medicaid would pay
them."
An NBC News investigation of the performance of Small
Smiles' 63 dental clinics over the last three years found repeated
allegations of substandard work and unnecessary procedures which drove
up the cost to taxpayers. The allegations came from anguished parents,
government investigators and former employees around the country.
Such
practices violate a settlement the company reached with the Justice
Department in January 2010, following allegations that it was bilking
taxpayers by doing unnecessary and substandard procedures on low-income children.
At
the time, Tony West, Assistant Attorney General for the Civil Division
of the Department of Justice said, "We have zero tolerance for those who
break the law to exploit children in need."
The company that
managed Small Smiles and affiliated clinics agreed to significantly
alter its practices and subject itself to independent monitoring. It
also agreed to pay $24 million, without admitting wrongdoing.
But three years later, records show the company has not cleaned up its act.
"This company sees dollar signs in the eyes of every child
they bring in," Senator Chuck Grassley told NBC News. Grassley has been
investigating dental organizations whose primary source of revenue is
Medicaid. He says Small Smiles practices assembly-line treatment,
focused more on quantity than quality.
"This whole investigation
kind of leads us to two things. To a conclusion that the tax payers are
being fleeced, and children are being abused." Grassley said.
Small
Smiles clinics are managed by a private corporation called CSHM, LLC,
which was until June called Church Street Health Management.
The
Department of Health and Human Services Office of the Inspector General
(HHS OIG) is responsible for monitoring the clinics and rendering
penalties when appropriate.
Lisa Re, a branch chief who heads an
HHS OIG team of attorneys, says CSHM is improving since it emerged from
bankruptcy in June 2012 with a new CEO and leadership.
"Recently, under new management, I would say that it is getting much better."
But according to letters from HHS OIG to Church Street, the compliance has been inconsistent and sometimes alarming.
In
May, the office required CSHM to temporarily close a facility in Oxon
Hill, Maryland to train staff on "the appropriate use of mouth props,
patient stabilization practices, appropriate use and administration of
anesthesia," among other things. Nine of 30 records the independent
monitor reviewed "did not provide any documentation or radiographic
evidence to support the medical necessity for the treatment provided.
Six of those nine records showed baby root canals were performed
"without medical necessity."
The OIG required the company to
divest from a location in Manassas, VA in March because of "flagrant
violations." A 2011 audit at that clinic found 104 of 244 baby root
canals performed by the lead dentist to be medically unnecessary. In a
sample of 34 records, 20 patients were restrained and given baby root
canals with insufficient anesthesia. The monitor expressed concern that
the children "were resisting treatment because they were being hurt."
In
June the office fined CSHM 100,000 dollars after an audit found
multiple breaches at an Ohio clinic, including treatments performed
without medical necessity, incomplete or poorly done root canals, crowns
places on "non-restorable" teeth and "poor techniques of administering
local anesthesia." Six of seven dentists performed root canals on
children that were not needed.
Last year, the agency issued a
230,000 dollar penalty, the largest it has ever levied, for multiple
failures to comply with provisions of the government agreement. Among
the breaches, the company failed to meet training and education
requirements.
Still, Small Smiles continues to rake in millions in
Medicaid dollars. Despite multiple threats to exclude the company from
receiving federal funds, it made 150 million dollars in revenue from
Medicaid in 2011.
The HHS OIG has given Church Street multiple
chances to keep the clinics in business, levying penalties against the
company and threatening to exclude them from receiving federal dollars.
But the threats generally come with an out — a way to repair the
breaches and avoid being exclusion.
Senator Grassley believes that cycle should come to an end.
"The
inspector general has given this group a lot of second chances. Every
time they get their hand in the cookie jar. All sorts of excuses. So you
get back to how long can this go on — the fleecing of the tax payers,
the abuse of children? And you get back to the point that maybe it's
about time for the inspector general to disqualify this company from
Medicaid."DENTAL CARE VACUUMS CREATE LIMITED OPTIONS IN LOW-INCOME NEIGHBORHOODS
Small Smiles treats about 500,000 children a year. Jamier Brown, 4, was one of them. His mother Jasmine brought him to Small Smiles in Dayton, Ohio at the end of 2011 because she couldn't afford her other options.
"I
knew that his mouth needed attention. And he was complaining that his
teeth were hurting, so I just couldn't wait around to see when I could
get the money. I had to go as soon as I could," she said.
Jamier received caps and fillings in most of his mouth in January. Months later, he is still in pain. The gum line is discolored where his front teeth we capped and Jamier says, "It hurts all the time."
Two
dentists who reviewed Jamier's records said he should have been treated
by a pediatric dentist, most likely in the hospital under general
anesthesia. One called the treatment on his front teeth "inadequate."
At
the time Jamier was treated, Jasmine was in Job Corps and living with
her mother. She blames herself for what happened to her son.
"It's
kinda my fault," she said as tears rolled down her face, "Because if I
would have had the money, he probably wouldn't have felt any of that
pain that he had to go through."
The guilt Brown feels is common
among parents who spoke with NBC News and claimed their children were
hurt at Small Smiles. They all said they didn’t know where else to go.
According
to the Centers for Medicare and Medicaid Services, 31.5 million
children were eligible for dental coverage through Medicaid in fiscal
year 2011, but only 14.7 million children utilized a dental or oral
health service.
Four out of five dentists don't take Medicaid,
some because they just don't treat children but others complain of low
reimbursement rates. Dr. Warren Brill is the president elect of the
American Academy of Pediatric Dentistry (AAPD). He has his own practice
in Baltimore, MD and 85 percent of his patients are on Medicaid.
"Reimbursement
rates are a large factor in terms of dentists not accepting children on
Medicaid, because the fees that they get are often times lower than the
cost of providing the care," he said.
According to AAPD 70
percent of its members accept Medicaid. But only 3.5 percent of all
professionally active dentists practice that specialty.
Nevertheless, Dr. Brill says parents of children on public insurance can find quality care.
"It's
a question of learning how to make the appointment, getting referrals
from state health departments, from dental associations, from friends
and relatives. Parents that find those avenues should be able to find a
dentist for their children."DOES PROFIT MODEL PUT CHILDREN AT RISK?
Because
Medicaid reimbursement rates are lower than what dentists charge other
patients, critics say to make a profit, the clinics rely on volume.
Dr.
Kianor Shah worked for Small Smiles briefly in 2011. He says he left
after witnessing disturbing practices. The dentist showed NBC News notes
he took about treatments he observed during his time there. Scattered
across several pages were words like "restraint brutal," "unnecessary"
and "no way."
"I observed excessive use of the papoose board and
excessive use of force to restrain children as well as overtreatment for
procedures that could have been done with much less invasive approach."
Shah
claims dentists were coerced into abusing children and overcharging
Medicaid by the promise of bonuses and pressure from management.
"I
was advised, quote unquote, 'The dentists eat what they kill.' That
means that they're gonna get paid for as much work as they do on those
Medicaid kids. And that was about the last straw for me."
Senator
Grassley's investigation involves dental management companies that are
controlled by corporate investors. Many states require dentists to own
the clinics but the management companies, like CSHM, effectively control
the operations.
"Our investigation has found a lot of private
equity money being invested in companies that are doing everything they
can in the most sophisticated way to take as much money out of Medicaid
as they can. And in the process of just milking the Medicaid program,
we're finding a lot of abuse of children."PROGRESSIVE IMPROVEMENT AT SMALL SMILES
The
Inspector General's office says the Small Smiles clinics have
progressively improved, and while that improvement has been "uneven,"
the company is providing essential care to a vulnerable population. The
agency maintains that it is better to aggressively monitor the company
than to shutter it.
"If we had closed down Small Smiles last
year, there would have been an uncontrolled shut down of this company
leaving half a million kids scrambling for dental care," said Lisa Re.
The
issue is further complicated by the states, which are responsible for
administering Medicaid. The OIG surveyed states about the impact of
closing the clinics and got a strong reaction.
"Some of the states
were alarmed that we were even considering closing any of the clinics
because they simply didn't have enough dentists to provide any care to
these kids," said Re.
The attorney said in the last couple of years the office found five clinics to have the most significant problems.
"It's important to understand that not every clinic is providing bad care. If that were the case, this is an easy decision."
According
to an affidavit in the Church Street bankruptcy filing earlier this
year, "more than 1.5 million patients have been served during the past
five years, improving overall dental health and access to care in many
low-income areas in the 22 states in which the Company has had
a presence."
Chris and Loretta Trujillo are grateful for the care
the Small Smiles in Denver provides their children. They say it is very
difficult to find dentists who take Medicaid and their children, Jordan,
Jazmin and Faith, have never had a bad experience.
"My kids have never been scared coming here," said mom Loretta. "They're excited to come."
The
Inspector General's office is taking on Small Smiles on a
clinic-by-clinic basis, vigorously monitoring them and assessing
penalties when appropriate.
"We have taken targeted and aggressive
action against the clinics that provided bad care while allowing the
company to provide good necessary care at the other clinics," she said,
adding that the clinics are showing marked improvements since a new CEO,
David Wilson, came on in June.
"The company as it operates today
is simply not the same as the company that was repeatedly violating the
agreement," Re insists.
In a statement to NBC News, CSHM's Wilson
wrote, "Patients are at the center of everything we do at CSHM. CSHM LLC
supports our affiliated dental centers so that they can continue to
provide access to quality dental care. Our dental centers serve
approximately one million patient visits per year, primarily to children
in communities with under-served access to dental care."
Following
an alarming audit of the Small Smiles clinic in Youngstown, Ohio that
found substandard and unnecessary care, the new management company,
which had just been formed, fired nine dentists there. The Inspector
General's office called that action encouraging.
CSHM stressed its
commitment to quality care. "Under the new management team, more than
50 new dentists have joined CSHM affiliated centers and the company
continues to support their ongoing efforts to recruit qualified
dentists."
That is simply not enough for Jasmine Brown. "I don't
want anybody else's child to have to go through what my son went
through, especially being that young. That's traumatic. That's something
that could follow him the rest of his life."
Jasmine is now
holding down two jobs — one as a pharmacy tech at CVS, the other as a
security guard at a men and women's shelter. She says she can now afford
to get Jamier the care he needs.

-- Early in 2013, we expect Smile
Brands to bring capital expenditures, mainly for new dental offices, into line
with internally generated cash flow.

-- We are lowering our corporate
credit rating on Smile Brands to 'B-' from 'B' and revising our rating outlook
to negative. At the same time, we are lowering our rating on the company's
senior secured debt to 'B-' from 'B'.

-- The negative rating outlook
reflects the possibility that Smile Brands will exhaust the $13.5 million of
funds available from its revolving credit facility as of Sept. 30, 2012, or
breach a loan agreement covenant.

Rating Action

On Nov. 21, 2012, Standard
& Poor's Ratings Services lowered its corporate credit rating on
Irvine, Calif.-based Smile Brands Group Inc. to 'B-'from 'B'. At the same time,
we revised the outlook on the rating to negative

In addition, we lowered our
rating on Smile Brands' senior secured debt to 'B-', in conjunction with the
downgrade, from 'B'. Our recovery rating on this debt remains unchanged at '3',
indicating our expectation for meaningful (50% to 70%) recovery of principal in
the event of payment default.

Smile Brands had negative free
operating cash flow (FOCF) after elevated capital spending for the past four
quarters and we expect this to continue in the fourth quarter of 2012. Our
downgrade is based on the expectation that early in 2013, Smile Brands will stem
the trend of negative FOCF by reducing spending for new dental offices or
taking other actions, such as paying interest on its holding company debt in
kind, rather than in cash.

We also expect adjusted debt to
EBITDA will rise to about 8x by the end of 2012, significantly higher than our
prior expectations, but still consistent with a "highly leveraged"
financial risk profile. As of Sept. 30, 2012, debt to EBITDA was 7.7x, adjusted
to capitalize operating leases and including holding company debt. We have
lowered our expectations for Smile Brands' revenue growth, EBITDA generation,
and cash flow over the next one to two years.

We expect revenues will grow at a mid-single-digit annual rate, somewhat faster
than the total U.S. dental services industry over the next few years, primarily
fueled by Smile Brands' geographic expansion and a slowly strengthening
economic climate. Our prior growth expectations were mid- to high-single-digit
annual growth.

Although Smile Brands' revenue
growth slowed in the second and third quarter of 2012, revenues increased 4.2%
for the 12 months ended Sept. 30, 2012.

We believe an unsuccessful
marketing strategy, which was subsequently abandoned, contributed to the growth
slowdown. Still, we believe underlying industry fundamentals remain sound and
relatively resistant to downturns. During the 2008 to 2010 recession, when
revenue for the total U.S. industry was nearly flat (according to data from the
Centers for Medicare and Medicaid Services), Smile Brands grew modestly,
supporting our expectation for continued, albeit modest, growth.

As newer offices mature, we
expect the lease-adjusted EBITDA margin (11.7% in the third quarter of 2012,
compared with 12.8% in the third quarter of 2011) to gradually recover to the
12% to 14% range, with some quarter-to-quarter variation.

Smile Brands' profitability is
supported by its infrastructure, economies of scale, and supplier discounts.
More rapid office expansion in recent quarters contributed to lower
profitability. Smile Brands' EBITDA margin (adjusted for leases, stock
compensation and nonrecurring items) began to dip in the fourth quarter of
2011, after rising substantially and steadily from 8.9% in 2005 to 14.8% for
the 12 months ended Sept. 30, 2011. Our lowered expectations for 2012 and 2013
EBITDA also affect cash flow generation Smile Brands' affiliated dental
practices operate a network of approximately 350 dental offices that offer
general and specialty dental services.

The $110 billion U.S. dental
practice industry is extremely fragmented and highly competitive, contributing
to our vulnerable business risk assessment.

Treatment volume, especially for
more discretionary services such as orthodontics, and patient financial capacity
exhibit some sensitivity to economic conditions. The availability of financing
for patients influences demand.

We also see vulnerabilities in the nature of
the DPM structure. While we believe potential changes in state or federal laws,
regulations, or accounting rules could hurt the DPM industry, we do not
currently incorporate any adverse developments in our base-case scenario.

The DPM business model has many retail
industry attributes, and so carries risks associated with advertising and
promotion, branding, and real estate selection, among others. Smile Brands
markets its brands, selects high-traffic office locations, and offers customers
convenient hours, comprehensive treatment, financing, and prices typically 15%
to 25% below those of traditional dentists. It targets middle-income patients
in growing metropolitan areas. Affiliated offices operate in 18 states, but
there are material concentrations in Texas and California.

The company provides
administrative, financial, and operating services to affiliated professional
corporations (PCs). Although the company does not own the affiliated PCs, its
financial statements consolidate them. Smile Brands generally owns the dental
office assets, but dentists and hygienists generally are not employees of the company,
in accordance with state laws.

We analyze the consolidated
financial statements on the basis presented (adjusted for the capitalization of
operating leases and other standard adjustments) because we believe they best
reflect the economic substance of the company's business model.

As of
Sept. 30, 2012, Smile Brands reported a negative cash balance of $0.5 million,
and $13.5 million was available from its $35 million revolving credit facility.
We believe Smile Brands may borrow an additional $1 million to $5 million in
the fourth quarter of 2012.

We
estimate Smile Brands will generate about $20 million of funds from operations
(FFO) in 2012 and $25 million in 2013. We expect small, if any,annual increases
in working capital. We project about $32 million of capital expenditures in
2012 (actual spending for the first nine months was $27.5 million), including
the recently completed roll out of digital x-rays. In 2013, we expect Smile
Brands to bring capital expenditures, mainly for new dental offices, into line
with internally generated cash flow. We believe annual maintenance capital
spending is less than $10 million.

Our
assessment of Smile Brands' liquidity profile incorporates the following
assumptions and expectations:

-- Over
the next 12 months, we expect sources of liquidity, including potential
borrowing under the revolver, to exceed uses by 1.2x. Even if EBITDA is 15%
below our projections, we estimate liquidity sources would cover cash needs,
although in that scenario the revolver could be fully drawn.

-- Debt
amortization is only $2.4 million annually through 2014.

-- Our
analysis of Smile Brands includes unrated holding company notes with a face
value of $100 million ($87 million after the original issue discount). Smile
Brands has been paying the 10% coupon in cash. To conserve cash, we believe it
may begin to pay interest in kind at 13%.

-- We
expect Smile Brands to remain in compliance with its loan agreement covenants,
notwithstanding requirement tightening. As of Sept. 30, 2012, there was a 17%
cushion under the tightest covenant.

-- We
assume Smile Brands will not make any acquisitions over the next two years.

Recovery
analysis

For our
complete recovery analysis, see our recovery report on Smile Brands, to be
published following this report on RatingsDirect.

Outlook

Our
negative rating outlook on Smile Brands reflects the possibility that it will
exhaust the $13.5 million of funds available from its revolving credit facility
as of Sept. 30, 2012, or breach a loan agreement covenant. We would consider
lowering the rating if negative FOCF persists in the first quarter of 2013 or
we expect the covenant cushion to approach 5%.

We would
consider revising the outlook to stable if Smile Brands generates discretionary
cash flow (through a combination of improved EBITDA and lower capital
spending), restores availability of its revolver, and we expect the covenant
cushion to stay above 15%.